Supply chain strategies of different products

Types of products and supply chain

Product
Functional: Usually staples with stable, Innovative: To enable high margins, innovative
predictive demand. Have long life cycles and low products are launched. Demand is unpredictable
profit margins due to high competition. and products have short life cycles.
Functional Innovative

Marketing mediation function: Ensuring the

Physical function: Converting raw material into Market products entering the market are as per the
parts, components and finished products and Physical customer requirements. Costs involved are losses
mediation
transporting them. Costs involved are due to discounts on overproduced products or
production, transport, inventory. losses due to unmet demand.
Supply
chain

Functional Innovative Manufacturing focus Inventory strategy Lead time Suppliers Product design

High turns, Short lead Selection Max cost

Efficient Not High average utilization minimum times but based on cost saving
Suitable
supply chain suitable inventory needs to be
cost saving

Responsive Large buffer Short lead Selection

Not Excess buffer capacity time no
Modular
supply chain Suitable stock based on design
suitable matter what responsiveness
 Impact of product life-cycle on supply chain strategy

Design and Make-to-order Kanban Make-to-order

Build

• Design-and-build strategy is most applicable during the introduction stage of the product life.
• During the growth stage, service level in terms of availability of a product responding to an unpredictable demand is key. As a
result the product is transferred to the MRP push based supply chain.
• Once the product has reached its mature stage it is switched to the Kanban supply chain, so as to best compete on cost.
• As the demand for the product tails off and enters the decline stage of the product life cycle, it is transferred back into the MRP
supply chain. This maximizes the service level within acceptable lead times for such a low volume product with highly
unpredictable demand.
• At the extreme end of the lifecycle, the product is moved back to the design-and-build strategy.

Reference: Link 1
 Product: Hard Seltzer Classification: Innovative
Seltzer Water industry
• Hard Seltzer, also known as spiked seltzer, is one of the fastest-growing alcoholic
beverage categories in the world. Hard Seltzer combines seltzer water, alcohol,
and usually fruit flavor or cane sugar
• From 2016 to 2021, the Hard Seltzer Industry growth is projected to average a
whopping 128% per year (CAGR)

White Claw
• White Claw was introduced in 2016 and is sold under nine different 100-
calorie flavours
• White Claw also has the highest market share of 58% in the US
White Claw supply chain strategy
• White Claw sales skyrocketed over 2018-2019 with an increment of
250% year over year
• This caused widespread shortage across the US, as the production was
low compared to the demand
• The company used a strategy known as “allocation”, where they sent
only a fixed amount to retailers irrespective of the demand
• Responding to retail shortages on a store-by-store basis hikes shipping
costs and can significantly impact profit
• Though this ensured the product reached all stores, it resulted in high
stockout costs
References: Link 1, Link 2, Link 3, Link 4
What went wrong?
• White Claw underestimated the demand and had their production
facilities churning out low numbers
• They decided to stick with low response – high efficiency allocation
strategy
• As they preferred to maintain their profit margins, they decided not to
respond on a store-by-store basis
• This also meant responding to spikes in demand could cause larger
issues upstream.
• So White Claw tried to maintain predictability by not reacting impulsively
• They waited for the demand to normalize to end allocation strategy
Was the product appropriately mapped?
• NO. White Claw relied on their marketing and customer relations teams
to bail them out every time someone complained about stockouts
• They could have adjusted their strategy to be highly responsive as the
product was innovative, according to the matrix
 Product: Boeing 787 Dreamliner Aircraft Classification: Innovative and responsive
To stimulate revenue growth and market response, Boeing decided to develop the 787 Dreamliner. The 787 Dreamliner is not only a
revolutionary aircraft, but it also utilizes an unconventional supply chain intended to drastically reduce development cost and time.

A traditional supply chain for airplane manufacturing- Efficient

Redesigned supply chain for the Dreamliner program- Responsive

References: Link 1
 Product: Apple iPhone Classification: Innovative to Functional

Apple’s Supply Chain has led Gartner's Supply Chain Top 25 list since 2013. Apple follows 2 paths:
1. When customer buys from Apple’s Online Store

Purchase of Products shipped

Shipping them to
Components & directly to
the assembling
Materials from customer via
plant in China
suppliers UPS/FedEx
2. For retail stores and other distributors, Apple keeps the phones at Elk Grove, California, where central
warehouse and call centers are located. All the products are shipped from there.
At the end of the product’s life, customers can send back the product to nearest Apple Stores or
dedicated recycling facilities.

References: Link 1, Link 2, Link 3

 Product Name- Cigarette Classification- Functional Market Capitalization (Rs. Cr.)

ITC was established on August 24, 1910 and is headquartered in Kolkata, West
Bengal, India. ITC has got one of the finest distribution channel (Efficient) in the
country. ITC's major cigarette brands include Wills Navy Cut, Gold Flake Kings, Gold
Flake Premium lights, etc. Here, we consider this product to be under the
functional category.

Wholesalers & Distributors are the suppliers. Cash purchase is

preferred by suppliers. Profit is derived from each product. They get
Intermediary Description Retailer fresh stock, almost everyday. Margins differ for packet sale & single
unit sale. E.g.- A packet bought at 115 may be sold at 119 or 120
Bangalore Hosur Buy goods from distributors and sells to retailers. The rate of product
Factories
is dependent on the quantity being ordered. Distributor vehicle
Wholesaler directly serve the wholesaler. E.g.- A packet bought at 111 may be sold
Ernakulam at 115
C & F Depots
They are link between the distributor and retailer. E.g.- 501 stores in a
Hawkers XYZ place. 5 hawkers under the division. Each person is allotted to each
Distributor D1 Hawkers area. They have a policy of supply at demand & don’t have a specific
target. They receive a commission from distributor for their services

Wholesaler WS1 They receive good from C & F and forward them to the retailers and
distributors. They provide warehousing of goods. They receive certain
Distributor percentage of sales as benefits. They place order to depots every
week and as per demand
Retailer R1
They carry and transfer the ITC products to the distributors. They
come under direct control of ITC. They receive goods from plants
Customer C1 C&F directly. E.g.- there are 3 depots in Kerala territory and the office is
situated in Ernakulam. They transfer goods to distributor by roads
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